China’s IPO volume tumbles 70 per cent after CSRC tightens rules to deter new offerings, boost stock markets

Just 42 companies have made share offerings since the CSRC’s August announcement to limit IPOs, down from 105 last year

Shanghai and Shenzhen exchanges last week imposed new curbs on additional stock offerings and rights offers, banning issues from underperforming listed-companies

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This photo taken on June 9, 2021 shows people standing next to the Bund Bull sculpture in Shanghai. Photo: AFP

Published: 4:30pm, 16 Nov 2023

China’s initial public offering (IPO) volume has slumped 70 per cent from a year ago after the securities regulator pledged in late August to bolster the sluggish stock market by restricting approvals and slowing down the pace of new-share offerings.

Forty-two companies have raised an aggregate 35.3 billion yuan (US$4.86 billion) via share offerings in mainland China’s three stock exchanges since the China Securities Regulatory Commission’s (CSRC) announcement on August 27, according to Bloomberg data. That compares with the 117.2 billion yuan raised by 105 companies in the same period last year.

In the August announcement, the regulator said it would “tighten the pace of IPOs in stages” to “promote the dynamic balance” between investment and financing.

The tightened pace of new-share sales is part of a package by the CSRC to restore confidence in China’s 9.7 trillion yuan stock market, which is grappling with a slew of negative headlines including decelerating economic growth, foreign investor exodus and rising interest rates globally. Stocks have responded by showing some stability, with the CSI 300 Index rebounding about 3 per cent from a four-year low struck last month. Support has also come in the form of a cut in stamp duties and direct state buying.

People walk past the Shanghai Stock Exchange building in Shanghai, China. Photo: EPA-EFE

“A slower pace of IPOs can to some extent get some of the funds tied up for new-share subscriptions to flow back to the secondary market,” said Fei Xiaoping, an analyst at brokerage Dongguan Securities. “Fewer IPO sales will add to the rarity of new shares and that will improve the market performance and boost liquidity.”